ISLAMABAD – The International Monetary Fund (IMF) has raised concerns over Pakistan’s recent tax exemptions for the sugar sector, the finance ministry informed lawmakers on Wednesday.
Briefing the National Assembly Standing Committee on Finance, Finance Secretary Imdad Ullah Bosal said that under the $7 billion Extended Fund Facility (EFF), Pakistan had agreed to meet 70 key benchmarks, one of which prohibits granting tax exemptions to any sector, including sugar.
“We are in talks with the IMF on this matter,” Bosal told the committee, which met under the chairmanship of Syed Naveed Qamar. “One of the program’s conditions clearly states the government cannot offer new tax exemptions.”
The controversy stems from the government’s decision to ease import restrictions on sugar. The Federal Board of Revenue (FBR) recently exempted customs duty on the import of 500,000 metric tons of sugar, slashed sales tax from 18% to just 0.25%, and cut withholding tax on imports to the same level. It also waived the 3% minimum value-added tax on the imported quantity.
However, FBR Chairman Rashid Mahmood Langrial clarified that his department did not initiate this move. “We didn’t send any summary for tax exemptions to the federal cabinet. The decision came from the Ministry of National Food Security and Research, and FBR only issued the necessary notifications after cabinet approval,” he explained.
Langrial noted that Pakistan’s sugar imports currently face a 54% tax burden, including 20% import duty, which he described as excessive. “There was a time when sugar prices fell to Rs130 per kilogram,” he said, suggesting that high tariffs should be reconsidered.
Committee chairman Naveed Qamar questioned the rationale behind importing sugar when there were already sufficient domestic stocks. “If we have ample sugar in the country, what is the need for import?” he asked.
Separately, Bosal told the committee that the IMF had also asked the finance ministry and the State Bank of Pakistan to jointly devise a plan for financing the Pakistan Remittances Initiative (PRI) — a program offering incentives to banks for boosting inflows from overseas Pakistanis.
Lawmakers observed that the rewards for banks handling remittance transactions were becoming a financial burden, likening it to another form of circular debt.
Last year, the government allocated Rs89 billion for the scheme, but the cost exceeded Rs100 billion, leaving no funds earmarked for the current fiscal year. Even if the payments were drawn from SBP profits, the committee said, they would ultimately burden the finance ministry indirectly.
The committee was further informed that the reward structure for banks has been revised from 20–30 Riyals per transaction to a flat 20 Riyals, while the minimum qualifying transaction threshold has been raised from $100 to $200.
